CHAPTER 8: CONCLUSION
8.1 Informal Economy Theory
This study demonstrates that the dualist position, in as far as it sees the informal economy as absorbing those who have been retrenched from the formal economy or those who can not find employment elsewhere, as correct.
Eight respondents had previously been formally employed while the rest were either employed in the informal economy or unemployed. The dualist position's contention that formal and informal economies are not linked but operate as two separate entities however, in the case of second hand clothes,
is not. The research demonstrates that the supply links are complex involving a variety of actors not all of whom are in the informal economy.
The legalists' position that informal activities are largely generated by government rules is not born out in this case. There are not many rules that govern the activity of street traders in the areas investigated. Very few traders identified government regulations as a problem in the operation of their business. Their advocating that there be a complete relaxation of rules may imply in this case that there should be no regulations governing the import of second hand clothes. As already indicated this is likely to undermine jobs in the formal manufacturing clothing sector.
The structuralists claim that the informal economy is subordinated to the formal economy and so pay particular attention to the links between the formal and informal economies. May and Stavrou (1989:4-5 highlight five forms of formal informal linkages. Given that this is a particular focus of this dissertation some attention is paid to this. Firstly, they (1989:4) argue, the activities of the informal sector act as an indirect transfer that benefits the urban capitalist sector - by producing cheap goods and services, the overall cost of living is kept down thus reducing workers' wage demands in the capitalist sector thereby allowing larger profits to be made by the capitalists.
Significant benefactors in the second hand clothes trade are consumers.
Whether this leads to the consumers then not demanding higher wages however is inconclusive. Secondly they note that by producing primarily low cost, marginally profitable goods and services for the domestic market, it allows the formal sector to concentrate on the production and distribution of more profitable goods and services for both the domestic and export market.
Simultaneously, the informal sector provides a protected market for the products of the formal sector (May and Stavrou, 1989:4). Since second hand clothes are a finished product the parts of this argument do not apply to this case. It could however be argued that the distribution of second hand clothes satisfies poorer consumers so reinforcing the trend to greater specialisation in the South African clothing industry. Thirdly, they claim there is a direct transfer of profits from the informal sector to the formal and state service
sectors in the form of hire fees, interest repayments on loans, bribes, licences and taxes. Such payments can reduce by a substantial proportion the actual returns received by petty commodity producers (1989:4). A minority of traders in this study - 25% - did report that they were paying for the sites they operated on. Some of these were paying to organisations, so this argument partly holds. The amounts reported however were not particularly high. No traders reported securing loans. This it can not be argued 'substantially' reduced traders gains. Finally they (1989:5) note that, because the informal sector often comprises family employment with household heads offering employment to their relatives, this reduces the burden on the state to introduce adequate systems of social security and welfare. This argument also applies in this study because this activity mainly provides employment to family members and relatives. Some members look after the children whilst other members are at the trading sites and this indeed shifts the responsibility of government for providing social security and welfare. Finally, the existence of the informal sector, characterized by labour intensity, alleviates the 'employment crises' experienced in much of the third world (Rogerson, 1986:7) cited in May and Stavrou (1989:5) and may promote political stability.
Since many people in South Africa are unemployed, trade in second hand clothes provides them with a means of survival.
This case demonstrates that the relationship is more complex. With second hand clothes, informality is not subordinated under formality. A group of formal suppliers depend on the existence and effective operation of the informal traders for their formal businesses to flourish. And this also applies to other segments of the clothing industry like the pinafores trade.
With reference to value chains approach, it has been stated earlier that this study will only focus on identifying the links in this activity by stating who the stakeholders are in the trade in second hand clothes. The information on who does what until the second hand clothes reach the final consumer on the
5 Pinafores are full aprons (like dress), which are culturally important amongst African women. They are made by informal manufacturers. All the inputs are obtained in the formal economy.
streets. This is because it was very difficult to get suppliers and it was clear that they do not want to be found. It can however be assumed that there are a number of suppliers in this activity. This activity seems to be well established but also difficult to trace. Traders were in comparison to their suppliers easy to find. It was successful in identifying that South African trade in second hand clothes does not only involve overseas second hand clothes but also involve local clothes and even the combination of both.